JP Morgan, the US banking group, set the tone for Wall Street when it began the reporting season by putting aside another $6.7bn (£4.2bn) in pay and bonuses for its 237,000 staff worldwide in the third quarter of the year.

Its pay bill for its 237,000 employees so far this year is now $21.5bn. The investment banking division accounted for $2bn of the extra funds put aside, giving the division a pay and bonuses pool three-quarters of the way through the year of $7.8bn.

The bank, which employs 13,000 in the UK, largely in investment banking, demonstrated that pay was still rising faster than revenues. The investment banking arm suffered a 14% fall in revenues in the first nine months of the year while the pay and bonus pool fell by just 10%.

The closely watched compensation ratio rose to 38% from 37% a year ago, which shows that the bank is trying to maintain its bonus payouts.

The Wall Street Journal estimated that Goldman Sachs, where revenue is projected to fall 13.5% this year to $39.1bn, will push ahead with a 3.7% rise in pay to $16.8bn when it reports its third quarter figures next week.

While JP Morgan's overall revenues were down 15% in the third quarter on a year ago, it beat analysts' expectations because of the fall in its provisions against bad debts. The provision for credit loss fell to $3.2bn in the quarter compared with $8,1bn a year ago and its earnings per share – closely watched on Wall Street as a measure of performance – beat expectations by coming in at 90 cents compared with expectations of 82 cents.

Jamie Dimon, JP Morgan's chief executive, warned that the losses caused by loans not being repaid in time could increase if the fragile US economy weakened. "We expect mortgage credit losses to remain at these high levels for the next several quarters," he said.

Much of the focus in the US was on its approach to the 115,000 home loans across 41 states which it is now having to review before evicting people from their homes.

The bank has more loans, in value, in foreclosure than any other institution in the US and is checking that it has not wrongly evicted customers because of the concerns of some US judges that banks are not following the correct procedures.

The bank also set aside a further $1.3bn of additional pretax litigation reserves. This prompted one analyst with Morgan Stanley, Betsy Graseck, to conclude: "We think JPM is building a war chest against mortgage-related litigation."